If you read all my posts on these issues, I like to think you’d be very well informed on these topics. But if you want to save time, my colleague Tom Palmer put all these issues together in a recent speech in Australia.

Best of all, he includes lots of great material on the moral and historical aspects of this discussion.

Why should there have been this improvement in the labour market? …The most convincing explanation is surely the Government’s welfare reforms. They have made it more difficult and less attractive to live off benefits, thereby increasing the supply of workers. In economists’ jargon, the natural rate of unemployment has fallen.

…more jobs are being created in Britain than in the rest of Europe put together. …There has clearly been a game-changer… What confounded the eggheads was that the number of workers is growing four times faster than the number of working-age people: in other words, Britons have become far more likely than pretty much anyone else to look for –and find – work. Why?

The answer is simple economics and incentives.

Fewer people now claim the three main out-of-work benefits than at any time during the Labour years. This, of course, is perfectly explained by IDS’s reforms, which make it a lot harder to live on welfare. Those who have been on incapacity benefit for years have been summoned to assessment centres to see what work they’re fit to do. Far more of the unemployed are being penalised for missing job interviews. A benefits cap has been imposed; housing benefit is being reformed; and the so-called “spare room subsidy” has been abolished, making life more expensive for those on benefits with unused rooms. …this is not about punishing “shirkers”, but helping good people trapped in a bad system. Fixing that system means making life harder for people who have it pretty tough already, at least for a short while. But under the Labour regime, such people were being led down the path to dependency and poverty. A new road had to be built, leading to work. And only now is it becoming clear quite how many people are taking it.

Here’s a chart showing how actual job creation is beating the forecasts.

These are remarkable numbers, particularly when you compare them to the job forecast put forth by the Obama White House, which grossly over-stated the number of jobs that would exist under the so-called stimulus.

8 Responses

You don’t have to reach the tipping point to decline. All that has to happen is this:

The aggregate residual enthusiasm for production amongst all your people, employed, unemployed, more enthusiastically employed, less enthusiastically employed, drops below the aggregate residual enthusiasm of your top worldwide competitors.

That is the real tipping point. As in business, loss of competitiveness marks the threshold where all he’ll breaks lose. It’s the hell of people worldwide who do not want to lower their standard of living by paying you the higher welfare burdened price, or accept the lower quality of your less motivated people.

I believe we have already passed a tipping point, but it is obscured by our measurement of economic activity, GDP.

Many so called jobs do not contribute to economic well-being. They would include: tax preparation and avoidance activities; lobbying; regulation compliance; lawsuit activities and avoidance procedures; healthcare reporting and malpractice avoidance; overstaffed federal, state, and local agencies; drug enforcement and incarceration activities; and immigration enforcement and assimilation costs; among others.

Some portion of these activities are merited and do contribute to economic growth. However, many of our best and brightest are wasted in zero sum or negative sum activities. If can we re-channel their efforts into productive areas we would be far better off.

The next step would be to re-incentivize those on welfare, unemployment, disability, and even some of those receiving Social Security. Just a small contribution to productivity would be huge, because of their numbers.